Diplomatic Bluebook 2001
Chapter III. REGIONAL DEVELOPMENTS

4. EUROPE

The year 2000 marked a further steady step to enlargement and deepening of the integration of the European Union (EU).

1. Enlargement and Institutional Reforms

In February, in addition to those countries which were already engaged in negotiations for accession-Poland, the Czech Republic, Hungary, Estonia, Slovenia, and Cyprus-Romania, Slovakia, Latvia, Lithuania, Bulgaria, and Malta also launched negotiations with the EU.

The Intergovernmental Conference (IGC) also began to discuss institutional reforms of the EU in response to EU enlargement, with the agenda including the size and composition of the European Commission, the redistribution of votes within the qualified majority voting system, and the expansion of the scope of application of qualified majority voting.

At the Nice European Council meeting (the EU Summit) in December, a long-continued and even all-night coordination process among leaders reached a conclusion, for the present, on the organizational reform issue by agreeing to the Treaty of Nice as the new treaty on the EU. As a result, the treaty covers the size and composition of the European Commission, new areas of application of qualified majority voting, the redistribution of votes within the qualified majority voting system, relaxation of requirements for invoking "closer cooperation" on particular policies to be implemented only by certain countries, and the redistribution of seats of countries in the European Parliament. Leaders also agreed to hold an IGC meeting in 2004 to discuss the possible rearrangement of treaties and the division of responsibility between the EU and EU member countries with the intent to amend the Treaty of Nice.

2. Economic Developments

Major progress was made in 2000 in regard to Information and Communications Technology (IT), tax coordination, and the formulation of the European Company Statute in particular.

In the IT area, the Santa Maria da Feira European Council meeting held in June 2000 endorsed the Europe 2002 Action Plan, that enables all European people to reap the benefits of an information society, thereby laying out a concrete strategy for developing the conditions to ensure Europe's transition to a new economy.

The Feira European Council meeting also saw a political agreement reached on tax coordination, a perennial issue discussed along with the introduction of the euro.

Moves were made at the Nice European Council meeting in December toward the passing of the European Company Statute. Although years will be needed before the implementation as actual law, the political agreement reached at the Nice European Council meeting was nevertheless noteworthy as opening the way for the establishment of pan-European companies ("Societas Europaea").

3. Economic and Monetary Union after the Introduction of the Euro

The euro has marked its second anniversary since its introduction in January 1999. Until November, the euro continued to depreciate against the U.S. dollar and the yen. Various explanations were presented for the euro's fall against the dollar, but the most cited ones were lack of markets' faith in the monetary policy of the European Central Bank (ECB) and the outflow of capital from Europe to the United States in the form of securities investment and direct investment. The ECB sought to curb excessive depreciation of the euro by repeatedly raising interest rates and intervening in the foreign exchange market (including coordinated intervention with the monetary authorities of the G7 members). As of late November, as the U.S. economic slowdown gradually became apparent, it became clear that the euro was on the road to recovery. However, the Euro Zone's various problems that have been pointed out (the structural problems epitomized by rigid labor markets; aggravation of intra-regional economic gaps; and the division of roles between the Euro Group [a meeting of finance ministers from the Euro Zone] and the ECB, etc.) have not been fundamentally resolved, and so prospects for the euro remain opaque.

Developments in 2000 regarding economic and monetary union included the decision to allow Greece to participate in the euro, as well as the Danish national referendum rejecting participation in the euro. Concerning Greece, which previously did not meet economic convergence standards, the Feira European Council meeting in June decided on its participation in the euro as of January 1, 2001. In the case of Denmark, a national referendum was held in September in regard to participation in the euro, with the majority vote going to non-participation.

4. Regional Security Cooperation

Where the European Union (EU) has focused to date on economic and currency integration, it is now in the process of leading the way toward integration in the areas of foreign and security policy.

At the Helsinki European Council meeting in December 1999, it was decided to establish a rapid reaction force numbering 50,000 to 60,000 persons to launch and conduct EU-led military operations in cases where North Atlantic Treaty Organization (NATO) as a whole was not involved. The force would have peacekeeping and crisis management functions. Leaders also agreed to establish related institutions, and efforts have gone forward toward achieving these goals.

As a result, Europe can now pool more than 100,000 persons, around 400 combat aircraft, and around 100 vessels. It has also been decided to transfer the peacekeeping and crisis management duties of the Western European Union (WEU) to the EU.

5. Responses to the Austrian Freedom Party

A coalition government comprising the Austrian People's Party and the Austrian Freedom Party*8 was launched in February. The 14 EU member countries accordingly decided to take the following bilateral measures against Austria: refusal to maintain official bilateral relations at the political level with the government of Austria including the Freedom Party; refusal to support Austrian candidates standing for posts in international organizations; and restriction of contact with Austrian ambassadors in EU member countries to the technical level. Subsequently, a neutral "three wise men" group was convened to conduct a study on the human rights situation in Austria, and in response to the conclusions of the study, France, which held the EU Presidency at that time, announced in September that it would lift the measures imposed on Austria.

While the measures were being imposed, there were discussions within the EU over the recognition of infringements of the basic EU values enshrined in the EU treaties, such as democracy and human rights, and an early warning system was introduced in the Treaty of Nice to allow the EU to determine clear risks of serious threats to its basic values with the agreement of more than four-fifths of the EU member countries of the Council.

Central and Eastern Europe in 2000, the closing year of the 20th century, made further progress toward democratization and the transition to market economy. In Croatia, presidential elections were held in January 2000 because of the death of President Franjo Tudjman at the end of 1999. The new President, Stjepan Mesic, pledged cooperation with the international community and domestic democratization. In Yugoslavia, federal presidential elections in September tossed out the Milosevic administration, the nationalist policies of which had left Yugoslavia internationally isolated (refer to Chapter I, C-3). In October, Poland re-elected the incumbent President Aleksander Kwasniewski, who is pursuing democratization. Throughout the region, then, political victory went to parties aspiring to democracy and market economy.

However, moves toward democracy and market economy have only just begun in the countries of the former Yugoslavia. For example, fair and democratic elections were held in Bosnia in April and November, resulting in the inauguration of a non-nationalist central government in February 2001, but nationalist forces still have a strong hold. The aftereffects of conflict in other Southeast European countries have also slowed the pace of reform, compared to countries in the north of Central and Eastern Europe. The stability and prosperity of the Southeast European region are key issues for the international community. Japan is actively supporting the reform efforts of the governments of the countries of Southeastern Europe with a view also to mutual support between Japan and Europe.

Japan has continued to support reform efforts by Central and Eastern European countries toward democratization and market economy. As democracy takes hold in the region, Japan's relations with those countries have been changing. Japan is now beginning to regard the northern countries of the region in particular as important partners, with the emphasis now on deepening ties in political, economic, and cultural arenas. Based on this perspective, when Hungarian President Arpad Goncz visited Japan in April, Prime Minister Mori observed that the two countries stood at a new point of departure toward deeper exchange and cooperation. The October visit of Her Imperial Highness Princess Sayako to Slovakia and Slovenia also deepened ties between Japan and Central and Eastern Europe.